A Review of the Nigerian Energy Industry

Financial market products & services update


24 October 2014, Sweetcrude, Lagos – Local and international financial market products sand services update.
NIGERIA: Nigeria pledged to keep supporting its currency after the naira approached a record low amid declining oil prices and the end of U.S. monetary stimulus that bolstered emerging-market assets. “We will continue to defend the naira,” Sarah Alade, a deputy governor at the Central Bank of Nigeria, said by phone today from Abuja, the capital. “Yesterday, we saw the naira at a level we were not comfortable with. We increased dollar supply in the market and it calmed.” Since mid-September, the central bank has used the reserves of Africa’s top oil producer and biggest economy to sell dollars outside of regular auctions held Mondays and Wednesdays, according to Standard Chartered Plc. It will keep using the auctions and direct dollar sales to banks to preserve the value of the currency, Alade said.

Financial markets 1FX: USDNGN printed lower again yesterday at close following another late intervention from the CBN. This time, however, the pair’s gains were more sustained, closing at 164.50/60 after opening at 165.45/55. The CBN showed further resolve in defending the currency, shelling out more liquidity in the last 30 minutes of the day’s trading session.

FIXED INCOME: Higher 1year stop rates at the auction usually means one thing – sell off in the tbill market and higher yields. But Thursday was quite an amazing turn-around. Yields went lower, all signs pointing to higher rates were simply ignored by street. Lots of liquidity in the system and this continues to give support to tbills – short, mid and long inclusive. OMO auction yesterday and no sale was made. Our guess is due to the system issues the CBN was having. Strong tone on bonds as has been the theme this week.

COMMODITIES: West Texas Intermediate retreated after the biggest gain since September amid speculation a drop in Saudi Arabian oil supplies isn’t a signal that OPEC’s largest producer is cutting output. WTI for December delivery dropped as much as 77 cents to $81.32 a barrel in electronic trading on the New York Mercantile Exchange and was at $81.65 at 2:55 p.m. Singapore time.

US: Quantitative easing may turn out to be a gift that keeps on giving for the U.S. economy. As the Federal Reserve prepares to end its third round of bond buying next week, the central bank plans to hang on to the record $4.48 trillion balance sheet it has accumulated since announcing the first round of purchases in November 2008. That will continue to keep a lid on borrowing costs, helping the Fed lift inflation closer to its target and providing support to a five-year expansion facing headwinds abroad, from war in the Mideast to slowing growth in Europe and China.

CHINA: China’s new-home prices fell in all but one city monitored by the government last month as the easing of property curbs failed to stem a market downturn amid tight credit. Prices dropped in 69 of the 70 cities in September from August, the National Bureau of Statistics said in a statement today, the most since January 2011 when the government changed the way it compiles the data. They fell in 68 cities in August. The central bank on Sept. 30 eased mortgage rules for homebuyers that have paid off existing loans, reversing course after a four-year campaign to contain home prices as Premier Li Keqiang seeks to prevent economic growth from drifting too far below the government’s 7.5 percent annual target.

Macro Economic Indicators
Inflation rate (YoY) for Sept. 2014                 8.30%
Monetary Policy Rate current                         12.00%
FX Reserves (Bn $) as at October 22 2014   39.117

Money Market Highlights

O/N                                 11.1417
30 Day                            12.4513
90 Day                            13.2367
180 Day                          14.0040
USD 1 Month                 0.1520
USD 2 Months               0.2014
USD 3 Months               0.2336
USD 6 Months               0.3237
USD 12 Months             0.5436

Benchmark Yields
Tenor             Maturity          Yield (%)

91d                   22-Jan-15            10.15
182d                 23-Apr-15            10.75
364d                03-Sep-15             11.79
2y                     16-Aug-16             12.57
3y                      31-Aug-17             12.81
5y                     29-Jun-19             12.80

Indicative Currency exchange Rates
                            Bid        Offer
USDNGN       164.37        165.07
EURUSD        1.2554       1.2756
GBPUSD        1.5950       1.6152
USDJPY         108.08       108.11
USDCHF        0.94795     0.9581
GBPEUR         1.2581        1.2785
USDZAR        10.8672      11.0706
JPYNGN        152.5597    152.6603
CHFNGN       172.24        173.93
EURNGN       208.03       209.40
GBPNGN        263.93       265.33
ZARNGN        14.09         16.01

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